THE WEEK THAT WAS

Market shrugs off weak industrial production data

The key benchmark indices soared last week shrugging off weak industrial production data, high inflation and soaring global crude oil prices. Depreciating domestic currency against the dollar boosted export driven IT stocks.

The BSE Sensex rose 697.87 points or 4.17% to 17,434.94 in the week ended Friday, 16 May 2008. The S&P CNX Nifty rose 175.10 points or 3.51% to 5157.70 in the week.

The BSE Mid-Cap index rose 137.04 points or 1.96% at 7,129.70 in the week. The BSE Small-Cap index rose 114.62 points or 1.35% at 8,620.26.

The wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's annual rise of 7.61%, government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% n 6 November 2004. The annual inflation rate was 5.74% during the corresponding week of the previous year.

India's industrial production growth dropped sharply to 3% in March 2008, slowing from the previous month's unrevised 8.6%, government data showed on Monday, 12 May 2008. It was the slowest annual growth since a 2.4% rise in February 2002.

Manufacturing production rose 2.9% in March 2008 from a year earlier, compared with 8.6% growth in February 2008. Industrial output rose 8.1% in 2007/08 compared with 11.6% in 2006/07.

US light crude for June delivery surged to a record high of $126.98 on Tuesday, 13 May 2008. However, that price eased to $123.74 on 15 May 2008 as rising US distillates stocks and Iran's reassurances that it would not cut crude exports added to a strengthening US dollar to limit the upside.

India's rupee fell to the lowest level since April 2007 to 42.445 per dollar on Wednesday, 14 May 2008 on speculation record crude oil prices will widen the nation's trade and current-account deficits, increasing demand for foreign currencies. The currency also weakened after overseas investors further sold local equities.

Foreign institutional investors (FII) have, so far, sold shares worth Rs 529.10 crore this month, till 14 May 2008. They sold shares worth Rs 10,887.20 crore in calendar year 2008, till 14 May 2008. Domestic funds sold shares worth Rs 639.80 this month, till 14 May 2008.

Tourist arrivals in India rose 10.7% to 3,69,677 in April 2008 over April 2007, the government data showed on Monday, 12 May 2008. Foreign exchange earnings from the sector rose 6.8% to $817 million in April 2008 over April 2007.

C. Rangarajan, chairman of Prime Minister’s Economic Advisory Council, on 12 May 2008, said the annual inflation rate is expected to moderate to 6% in the next three to four months from 3-½ year highs of 7.6% in late April 2008. Rangarajan said the economy is expected to grow 8% to 8.5% in the fiscal year ending March 2009 as high global oil prices shave off some momentum.